COVID-19 has resulted in not just a health-related nightmare, but a huge economic mess. With millions of Americans out of work and countless small businesses closed down, lawmakers had no choice but to intervene.
Their answer? The CARES (Coronavirus Aid, Relief, and Economic Security) Act, which passed in late March and calls for, among other provisions, a one-time $1,200 stimulus payment for qualifying Americans, plus an additional $500 per dependent child.
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Millions of Americans have already received their stimulus cash, and payments will continue to go out over the next few months until all eligible recipients have their money in hand. But if your income was too high in 2018 or 2019 to qualify, you won't get a stimulus payment during this first round. That said, if your income is much lower in 2020 than it was in 2018 or 2019, you may be entitled to that stimulus cash after all -- but you may need to sit tight and wait to get it.
What are the income thresholds for getting a stimulus?
The income limits for stimulus eligibility will depend on your tax-filing status, as follows:
- $75,000 as a single tax filer
- $112,500 as a head of household
- $150,000 as a married couple filing jointly
If your earnings exceed these thresholds, it doesn't mean that you won't get a stimulus payment at all; it just means you'll receive less. Once your earnings surpass these levels, your stimulus is reduced by $5 for each $100 in earnings you have on file. As such, if you're single with no dependents with a last-reported income of $80,000, you'll lose $250 of your stimulus payment for earning $5,000 over the limit, leaving you with a total payment of $950.
The earnings that are taken into account when determining your eligibility, however, are based on the adjusted gross income reported on either your 2018 or 2019 tax return. (Keep in mind that a lot of people haven't filed their 2019 taxes yet, since the deadline to do so was pushed back until July 15.)
But what if you don't qualify for a stimulus check based on your 2018 or 2019 income, but you do qualify based on your 2020 income? It may not be an uncommon scenario, since many Americans have lost their jobs or seen their earnings drop due to COVID-19.
If that's the case, here's the good news: You may be entitled to a stimulus payment after all.
Now, the bad news: As of now, you'll need to wait until you file your 2020 tax return to get it. At that point, you should be able to claim your stimulus as a refundable tax credit on your 2020 taxes.
Unfortunately, a lot of people whose earnings have dropped substantially this year can't afford to wait until the spring of 2021 to get their money. It's possible that the IRS will implement a system where people in this situation can register for a stimulus sooner based on their current income, but right now, that option is not on the table.
Incidentally, the same thing applies if you had a child in 2020 who renders you eligible for an extra $500 in stimulus cash. As of now, you'll need to wait until you file your 2020 tax return to claim that additional money.
Hang tight
When you're in a tough spot financially, waiting almost a year to receive a stimulus payment is easier said than done. But the fact that you may have a windfall coming should still spell some relief, so for now, do your best to sit tight until that money comes in. If you're having trouble keeping up with your expenses, talk to your lenders and service providers and ask for some leeway in paying your bills. You may be surprised at how much flexibility you get.
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